I was trying to work out the pros and cons
It's all from the p.o.v of a higher rate taxpayer who'll also be a higher rate pensioner
as it's less complicated than considering other scenarios, to my mind at least.
Scenario 1: you don't do it and pocket the €4,800.
Scenario 2: You put 10K into a prsa at age 64 and it will mature in a year.
Right away your net income will drop by €4,800 plus the €1,200 you need to pay in PRSI and USC on the 10k so an income drop of €6000 for the year.
At age 65 you take a quarter of the 10k as a lump sum.
The other 7.5K you use to purchase an annuity that will rise in line with inflation.
This page ( https://www.retirementline.co.uk/annuities/annuity-rates/#best-annuity-rates ) gives the rate of such an annuity as being 4.72296%
This will give you an income of €354.22 pa (ie 7500 * 0.0472296) which after tax and usc will be €184.19 p.a.
19 years of such payments will amount to €3,500* and only at that point at age 85 will you begin to be at an advantage
over taking the €4,800 twenty years earlier.
If that's what it amounts to, it doesn't sound like all that attractive a deal to me
The 3500 plus the 2500 lump sum now equal the income drop in the year you took out the prsa
It's all from the p.o.v of a higher rate taxpayer who'll also be a higher rate pensioner
as it's less complicated than considering other scenarios, to my mind at least.
Scenario 1: you don't do it and pocket the €4,800.
Scenario 2: You put 10K into a prsa at age 64 and it will mature in a year.
Right away your net income will drop by €4,800 plus the €1,200 you need to pay in PRSI and USC on the 10k so an income drop of €6000 for the year.
At age 65 you take a quarter of the 10k as a lump sum.
The other 7.5K you use to purchase an annuity that will rise in line with inflation.
This page ( https://www.retirementline.co.uk/annuities/annuity-rates/#best-annuity-rates ) gives the rate of such an annuity as being 4.72296%
This will give you an income of €354.22 pa (ie 7500 * 0.0472296) which after tax and usc will be €184.19 p.a.
19 years of such payments will amount to €3,500* and only at that point at age 85 will you begin to be at an advantage
over taking the €4,800 twenty years earlier.
If that's what it amounts to, it doesn't sound like all that attractive a deal to me
The 3500 plus the 2500 lump sum now equal the income drop in the year you took out the prsa